Prudence vs professionalism: Exploratory examination of pension trustee capability

Abstract

Purpose

This paper seeks to report original research examining how effectively board members of occupational pension trusts administer pension plan assets on behalf of their respective members. The concept of the concerned lay board member (the “prudent person”) is increasingly under attack from the media, government and professional bodies. The proposition is that lay members should be replaced by professionals. Aims to explore the prudence vs professionalism theme through an examination of trustee profile, trustee financial competence and trustee performance effectiveness.

Design/methodology/approach

The study adopts demographic theory from the perspective that group demographics are a critical focus of analysis due to their potent impact on organisational outcomes. A qualitative approach was initially pursued in order to capture trustee views which formed the platform for the second quantitative phase of the study.

Findings

The study concludes that lay trustees display comparable capacity to professional trustees and emerge as equally able to positively respond to the future challenges facing pension boards.

Practical implications

The study highlights that HR practitioners can make a significant impact on the selection and development of pension board trustees.

Originality/value

Rather than continuing with the unhelpful, historically based distinction between lay and professional pension board trustees, this original study identifies the growing complexities of managing pension trusts, whilst emphasising the capabilities required to pursue innovative investment practice in the future. This paper is likely to be of value to researchers in the areas of board and pension trust performance, fund trustees, actuaries, trust fund managers, employee benefits consultancies, the Treasury and HR professionals.

Citation

Kakabadse, N.K. and Kakabadse, A. (2005), "Prudence vs professionalism: Exploratory examination of pension trustee capability", Personnel Review, Vol. 34 No. 5, pp. 567-587. https://doi.org/10.1108/00483480510612521